Now that you’ve got your business plan, it’s time to get down to the nitty-gritty, which includes creating your invoice. Learning how to make a simple invoice will allow you to start charging your clients, which in turn means that you get paid for your work. 

What is an invoice?

An invoice is sent out by a business to their clients or customers as proof of transaction, and to ask for payment for a service or product provided. It is also sometimes otherwise known as a bill or sales invoice.

An invoice is not a receipt. While invoices are accounting documents that request payment from customers for goods and services sold, receipts serve as proof of a business transaction. It acknowledges that the customer has paid for the goods and services sold.

What to include in an invoice

It is important to create a simple, streamlined invoice that contains basic information for your clients. The less complicated it is, the less chance there will be for confusion and the more likely you will be to get your payment on time.

The first thing you should include will be your contact information. This includes your company name, address, phone number and email address. If you have a company logo, that should be added too. The same should be done with your client’s contact information, which includes the billing contact name, address, phone number and email address.

Secondly, add the invoice date. This makes it easier for both you and your client to file your invoices.

Thirdly, you will want to establish a simple invoice numbering system. Every invoice has a unique number attached to it, making bookkeeping a lot easier and keeping everything organised. It also comes in handy when you’re trying to discuss a specific invoice with a client. Keep your numbering system simple – numbering them off in sequence eg. #01, followed by #02 is a foolproof way to get started.

Then, you want to outline the services or goods provided to your client. The easiest way is to start by creating a basic table with four columns. The following pieces of information should go in each column:

1. A brief description of the service 
2. The number of hours worked or the quantity
3. The rate of pay
4. The subtotal for each service

After this is done, you can create as many rows in the table as you need to list each specific service or good. The tables below show examples of how your table should look like

Company providing service:

Company providing good:

Next, explain your payment terms on each invoice. Your payment terms should also explain your late fee policy if you plan to charge clients for late payment. An example of some payment methods includes bank transfers, credit card, checks, cash or online payment.

Lastly, you should include the amount due and payment due date at the bottom of the document. They should be clearly stated, including any applicable taxes. Ensure that your information stands out by bolding, underlining or using a different form colour. Specific payment deadlines should be written out clearly to avoid confusion, such as “Payment Due 30th May, 2021”.

Invoice Example

For a visual representation of what your invoice should look like, here is an example from Vertex42 that gives you a rough idea of what you will need.

Image credit: Vertex42

Other invoice terms

There are several payment terms that you can choose to include in your invoice. These terms let your clients know when payment is expected from them and how they can make payment.

Payment in Advance (PIA): this lets your client know that they are expected to pay the total amount due for a service or good upfront before work begins

Cash in Advance (CIA): this specifies both when you expect payment (before work begins) and how the client can pay you (in cash)

Upon Receipt: this means that you expect payment immediately when the client receives your invoice

Net: Indicates when payment is due. For example, Net 7 means that payment is due seven days from the invoice date

End of Month (EOM): this means that payment is due at the end of the month in which the invoice is received

 Month Following Invoice (MFI): If it states 15 MFI, it means that payment is due on the 15th of the new month following the invoice date.

50 Percent Upfront: this means that the client must pay 50% of the total invoice before work on the project begins. This is common for large projects that take a long time to complete.

Sending your invoice

The fastest way to send your invoice is by email. You can attach your invoice as an editable PDF to prevent fraud. Be sure to also include a clear and brief description of your business and invoice in the subject line and body of the email.

Different customers and clients may process their invoices differently. If it is within your bandwidth to do so, find out if there is certain information to include that will help you get paid faster. 

Creating an invoice on your own

There are many tools online to help you create your own invoice. Invoice software programmes such as Paypal and Square help you generate invoices in a jiffy. Alternatively, simple tools such as Google Docs and Microsoft Word also have templates that are available for you to use.

Generating your first invoice

With this step by step guide to creating your invoice, you’ll now be ready to handle all transactions that come your way. As your business grows, you may want to look for a more hassle-free way of handling all your payments. Put your time and focus to better use and handle all your accounting and bookkeeping needs with us at Margin Wheeler.